Bion was a lieutenant in the UK’s Royal Tank Regiment during the First World War. When the tank he commanded in Northern France was disabled, he got out, rounded up some infantry and established an advanced post in an enemy trench.

Under fire, he climbed onto the roof of his tank to get a better aim. He kept a heavy counter-attack at bay, first with his own ammunition and then, when that ran out, using a machine gun that had been abandoned by the Germans.

He earned his decorations for continuing to think while under fire. This was an ability he applied later in life, when he became a psychoanalyst.

Bion was the pioneer of group therapy, which he developed during the Second World War while treating shell-shock victims. This developed into his work on thought and the business of thinking.
The terminology Bion invented provides a more than superficial connection between his work and modern-day asset management. He used “beta” to refer to raw experience and “alpha function” for the process that turns that primitive material into something meaningful.

In the world of asset management, beta refers to the returns generated from a passive investment, while alpha refers to outperformance resulting from active management – although some managers misuse it to mean skill, apparently forgetting that outperformance can be due to luck as much as judgment.

It is possible to see a correspondence between the two betas, the raw experience Bion had in mind and the ups and downs of the market; and between his idea of an alpha function and the process of generating outperformance.

He thought of the alpha function as daydreaming. He saw thoughts as seeking a thinker. The difficult thing is to let in the thought, and the more disturbing the thought, the greater the difficulty. The most receptive state, he said, is reverie.

Asset management companies do not want to convey the impression of dreamy portfolio managers, even when they claim to work night and day for their clients. Quite the opposite. They want clients to think of their portfolio managers as working hard, by which they mean doing things, such as reading company reports, asking questions of company executives and drawing charts showing Porter’s five forces, the method for analysing industries set out by Professor Michael Porter at Harvard Business School in 1979.

That image is all very macho. Asset management companies like to talk in terms of “the pursuit of alpha”, which has connotations of the alpha male.

But doing lots of things is an effective way to avoid uncomfortable thoughts.

A good fund manager, according to Anthony Bolton of Fidelity International, whose three-decade career running Fidelity’s Special Situations fund has secured his place in most observers’ asset management hall of fame, has a hunger for analysis. He or she recognises there is always more to know and wants to know it, even if it contradicts the view he or she had reached before. Flexible conviction, a willingness to change one’s mind in the light of new evidence, is another hallmark of a good fund manager, in Bolton’s book.

In other words, Bolton advocates a feeling of curiosity and an openness to new information. That could be construed as reverie – which Bion thought of as a feminine function.

Bion liked to speak his mind, although not everything he said seems to make sense on first hearing. He was recommended for the Victoria Cross, the UK’s highest military decoration, but when the War Office interviewed him about what he had done that day in Northern France, he spoke so disparagingly of the way the Government was conducting the conflict that only the lesser honour was awarded.

He felt he might as well have been recommended for a court martial as given a medal: “It depended on the direction which one took ‘when one ran away’,” he wrote.

Man seizes the day

Not content with bucking one trend, Man Group, the hedge fund and fund of hedge funds group, is bucking three.

It is raising debt. It successfully issued a $300m hybrid note two months ago and Peter Clarke, the company’s chief executive, said last week he expected to follow this up with more issues, of at least a similar size, as the credit market reopens. At the same time, the group has recommenced its share buyback programme, giving back some of its $1.5bn of cash.

The net effect of these moves will be to increase its financial gearing, its level of debt relative to its equity capital, which should reduce its cost of capital. This comes when many other financial services groups seem to be going the other way, in particular banks raising equity through rights issues.

The banks’ financial weakness has knocked them out as purchasers of hedge fund management companies, where until last summer they were busier buyers than anyone else. But Clarke said Man Group was trying to seize the opportunity to snap up bargains.

The third way in which Man Group is bucking a trend is in gathering assets while most other hedge fund managers have stalled or suffered net outflows. It has added an extra $4bn, taking it to $79bn, in the past two months.